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The Corporation of Madras, by Its Executive Authority, the Commissioner Vs. Ratanlal Fomra and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported in(1974)1MLJ8
AppellantThe Corporation of Madras, by Its Executive Authority, the Commissioner;fomra Brothers by Partner Ka
RespondentRatanlal Fomra and ors.;The Corporation of Madras, by Its Commissioner
Cases ReferredVenkatasubbiah Chetty v. Govindarajulu Naidu I.L.R.
Excerpt:
- .....fomra brothers, who is the defendant in that suit, for the supply of certain types of high tension power cables by the firm to the corporation. c.s. no. 48 of 1967 has been filed by the corporation of madras for the recovery of a sum of rs. 1,40,625 with subsequent interest towards damages on the ground that the defendant committed breach of contract in its failure to supply the power cables contracted for and that the corporation was forced to make purchases from open market in which they had to pay more than the price settled between the parties in respect of the same type of cables. the other suit namely, c.s. no. 33 of 1968 is one filed by the above said partnership firm, namely, fomra brothers against the corporation of madras for the recovery of a sum of rs. 16,432.98 with interest.....
Judgment:

N.S. Ramaswami, J.

1. These two suits arise out of a contract between the Corporation of Madras, who is the plaintiff in C.S. No. 48 of 1967 and a partnership firm by name Fomra Brothers, who is the defendant in that suit, for the supply of certain types of high tension power cables by the firm to the Corporation. C.S. No. 48 of 1967 has been filed by the Corporation of Madras for the recovery of a sum of Rs. 1,40,625 with subsequent interest towards damages on the ground that the defendant committed breach of contract in its failure to supply the power cables contracted for and that the Corporation was forced to make purchases from open market in which they had to pay more than the price settled between the parties in respect of the same type of cables. The other suit namely, C.S. No. 33 of 1968 is one filed by the above said partnership firm, namely, Fomra Brothers against the Corporation of Madras for the recovery of a sum of Rs. 16,432.98 with interest of Rs. 1,297.02 totalling Rs. 17,730 towards the value of cables already supplied by the firm to the Corporation. It is common case that out of the contracted quantity of power cables only a small portion was supplied by the firm to the Corporation and the value of those supplies came to Rs. 16,432.98. This amount had been withheld by the Corporation, though it was due to the firm, on the ground that the same was liable to be set off towards the damages suffered by the Corporation owing to the firm's failure to supply the major part of the contracted quantity of power cables.

Hereinafter in this judgment the Corporation of Madras would be referred to as the plaintiff and the partnership firm namely, Fomra Brothers would be referred to as the defendant.

2. The plaintiff invited tenders for the supply of power cables of the specified type and the defendant filed a tender. It was duly accepted by the plaintiff by its communication dated 4th November, 1963. Later, a formal contract was executed between the parties and that is dated 6th June, 1964. It is common ground that the defendant supplied only 7,220 metres of a particular type of power cable and failed to supply the balance. There had been correspondence between the parties and the defendant had been asking for time on the ground that its principals namely, a company called Power Cables which is a manufacturing company at Bombay, had not made the supplies. By a letter dated 6th January, 1965, the plaintiff notified that if the defendant failed to supply' the quantity within seven days from the date of receipt of that letter, the contract would be terminated and purchase at the risk of the defendant as per Clause 4 of the terms of the contract would be made, and that the penal provisions of the contract would be enforced. The defendant by their letter dated 11th January, 1965 requested further ex-tension of time, but the plaintiff refused further extension. It is, therefore, the case of the plaintiff that the defendant committed breach of the contract. Then the plaintiff purchased the power cables of the type required in the open market from various concerns such as Messrs. Galada Enterprise, M/s. S.G. Electricals and M/s. Crompton Engineering Company (P) Limited. The total price paid by the plaintiff for these purchases in the open market was Rs. 4,52,544 as per the case of the plaintiff. It is its further case that the cost of the cables at the contract rate came to only Rs. 3,11,919. Therefore, the plaintiff says that it had suffered damages to the extent of Rs. 1,40,625.

3. The defendant in its written statement has refuted the claim of the plaintiff and mainly contended that the defendant was not liable to be sued by the plaintiff because it acted only as the agent of the manufacturing company, namely, the Power Cables (P) Limited, Bombay who were termed and disclosed to the plaintiff as principals of the defendant in respect of the tender made by the defendant. It is pointed out that in the tender itself it was specifically stated that orders for the goods must be placed by the plaintiff with the said company and that payments were to be made by the plaintiff direct to that company. It is its further case that the period of delivery mentioned in the contract was only tentative and subject to force majeure conditions including shortage of raw materials, breakdown in machinery, labour strikes and also availability of electrical energy. It is further stated that as per the terms of the tender the defendant was liable to supply the goods only after the said goods were supplied by the Power Cables Private Limited, and if due to any reason whatsoever the Power Cables Private Limited, failed, to supply the said goods to the defendant, the defendant was not liable to supply the same to the plaintiff. In the view that I am taking regarding the question whether suit by, the plaintiff is maintainable against the defendant it having acted as the agent of disclosed principal namely, Power Cables Private Limited, I think it is not necessary to elaborate the other defences taken by the defendant. Suffice it to mention the issues set for trial. They are :

1. What are the terms and conditions of the contract entered into between the plaintiff and the defendant for the sale and purchase of cables?

2. Is the defendant not liable to the plaintiff for all or any of the reasons relied upon in para. 4 of the written statement ?

3. Is the defendant guilty of breach of contract ?

4. What is the correct date of breach if any, committed by the defendant, and what is the proper or correct measure of damages?

5. Is the defendant absolved from the liability to deliver the goods to the plaintiff on the ground that the defendant's principals had not supplied the cable to the defendant?

6. What is the precise scope and effect of the provisions relating to purchase Is it illegal and invalid Will the clause for repurchase entitle the plaintiff to claim damages except in accordance with law, i.e., the difference between the contract rate and the market rate on the date of the breach ?

7. To what reliefs are the parties entitled ?

4. The other suit, namely, C.S. No. 33 of 1968 was originally filed by the defendant against the plaintiff (Corporation of Madras) in the City Civil Court, Madras as O.S. No. 4476 of 1966. It was later transferred to this Court to be tried along with C.S. No. 48 of 1967. As already noted that suit is for the recovery of a total sum of Rs. 17,730 towards the cost of the cables already supplied by the defendant to the plaintiff with interest. As far as this suit is concerned the plaintiff (who. is the defendant in that suit) has practically no defence except saying that it had every right to withhold the amounts until it is reimbursed by the defendant for the loss incurred by the plaintiff in respect of breach of contract committed by the defendant. The only material issue framed in that suit by the Judge of the City Civil Court, when the suit was pending there is, whether the Corporation of Madras is liable to refund the suit amount. It is not a question of refund and the issue should properly read as whether the Corporation of Madras is entitled to set off the suit amount against the claim for damages. The evidence was recorded in C.S. No. 48 of 1967 and treated as evidence in the other suit as well. Apart from exhibiting a number of documents, two witnesses, namely the Upper Division Clerk dealing with the subject and the Electrical Engineer concerned, were examined by the plaintiff and two witnesses were examined by the defendant.

5. The main question is, whether as per the provisions of Section 230 of the Contract Act, the suit for the claim of damages is not maintainable against the defendant.

6. From the evidence on record it appears to me to be indisputable that the defendant entered into the contract with the plaintiff only in its capacity as the agent of the company, namely, the Power Cables Private Limited and not in its individual capacity. Exhibit P-1 dated 24th September, 1963 is the tender made by the defendant. It is mentioned in this tender that the defendant was the distributor for the 'Insulast' brand armoured power cables manufactured by Messrs. Power Cables Private Limited, for Madras State, and as such the defendant was quoting for the products of that company on behalf of that company, namely, Messrs. Power Cables Private Limited, Bombay. It is further mentioned that in the event of the plaintiff accepting the tender and making an order, it may please note that the same must be placed on the above said company directly and payment was to be made to them direct. It is further stated that the consignment would be despatched by the defendant's principals (namely the company) to Madras and the defendant being their distributor shall clear the same and deliver them at the plaintiff's stores, on behalf of the company. Under the heading 'delivery' in this tender in respect of item No. 1 the defendant says that the delivery was to start after eight weeks time after receipt of the plaintiff's firm order by the defendant's principals, and that delivery would be effected at the rate of seven K. Ms. per month. In respect of item No. 2 also, there is similar reference to the order being received by the defendant's principals for effecting delivery. Exhibit P-5 dated 4th November, 1963 is the letter from the plaintiff to the defendant accepting the latter's tender. Here the plaintiff itself refers to the Power Cables Private Limited, as the principals of the defendant. Regarding the period of delivery this acceptance letter says that it was to start after eight weeks' time after the receipt of the order (from the plaintiff) by the principals (Power Cables Private Limited), and delivery to be effected at the rate of seven K. Ms. per month. With regard to the second item also, there is similar reference. This is in accord with the terms of the tender regarding delivery. Exhibit P-12 is the formal printed agreement dated 6th June, 1964 entered into between the parties. This agreement has been signed by the defendant without stating that it was so signing as the agent of Power Cables Private Limited. As a matter of fact there is no reference to the principals in this printed contract.

7. If the tender and the letter of acceptance are to be looked into for the purpose of ascertaining whether the defendant entered into this contract on its own behalf or as agent of the Power Cables Private Limited, there can be no difficulty whatsoever in coming to the conclusion that it acted only as the agent of the company and not otherwise. However, me learned Counsel for the plaintiff contends that whatever be the terms mentioned in the tender and the acceptance letter they should be ignored because the formal contract which was executed by the parties at a later date should be deemed to have superseded the other documents. He further contended that if the terms of the contract as found in the tender and the acceptance letter are inconsistent with the terms contained in the formal contract, the latter should prevail. However, I am not impressed with this part of the argument of the learned Counsel for the plaintiff. There can be no doubt that the contract between the plaintiff and the defendant came to be concluded when the plaintiff wrote the letter of acceptance. An offer had been made in the tender and once the offer is accepted by the other party, a contract is undoubtedly concluded. This position is not in dispute. The learned Counsel for the plaintiff also concedes that the tender and the acceptance letter are also part of the contract. Therefore, it is not correct to say that the printed form contract should be deemed to have superseded the other documents, namely, the tender and the acceptance letter.

8. The contention of the learned Counsel for the plaintiff is that because in the formal contract there is no reference to the Power Cables Private Limited, and the defendant has signed the contract not as the agent of its principals, the defendant cannot be heard to say that Section 230 of the Contract Act is a bar to the maintainability of the suit. Under that section, in the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he bound by them. Under certain circumstances a contract to the contrary shall be presumed to exist, and one such circumstance is non-disclosure of the principal. In the present case, there is no question of the principal having not been disclosed. As is already seen in the tender the defendant had made it clear that it was making the tender only on behalf of the Power Cables Private Limited.

Therefore, we have to only find whether the contract had been entered into by the defendant on behalf of the principal. As mentioned earlier the contention on behalf of the plaintiff is that because in the formal contract there is no reference to the principal and the defendant signed the contract only in its individual name and not as the agent of the Power Cables Private Limited, it must be held that the contract was entered into by the defendant only on its own behalf and not as the agent of the company. In this connection the learned Counsel relied on a Bench decision reported in The South Indian Industrials Limited v. Mindi Rama Jogi (1928) 27 M.L.J. 501 : 26 I.C. 823. In that case the defendants were Dubashes under one Arbuthnot and Company. As Dubashes they stood guarantee for the due performance of the contract entered into by Arbuthnot and Company, through the defendants. Arbuthnot and Company had transferred its business to the plaintiffs in that suit, namely, the South Indian Industrials Limited. However Arbuthnot and Company were the managing agents of the abovesaid South Indian Industrials Limited. Even after the abovesaid transfer of business to the South Indian Industrials, Arbuthnot and Company had been entering into contracts with the defendants not as managing agents of the South Indian Industrials Limited, but only on their own behalf. On the ground that the defendants had committed breach of contract the South Indian Industrials Limited who were not parties to the contract filed the suit against the defendants. It was held in that suit that the plaintiffs had no privity of contract with the defendants and that the suit was not maintainable. But this decision would not help the plaintiff in the present suit. There, the finding was that the defendants in that suit were sub-agents of Arbuthnot and Company, that the said company and the defendants were contracting as independent parties and that, therefore, the plaintiffs could not sue the defendants. It was alternatively found that even otherwise, there was a special agreement between the parties disentitling the plaintiffs from suing upon the contract. The learned Counsel for the plaintiffs relied upon certain observations in that judgment in support of his contention that, even though the principal might have been disclosed, the personal liability of the agent should be upheld on the ground that he did not sign as agent. It is true, in this case, that the formal contract had not been signed by the defendants as the agent of the company, namely, the Power Cables Limited. But as already pointed out, the formal printed form contract is not the only document constituting the contract. The tender submitted by the defendant and the acceptance by the plaintiff really concluded the contract and those documents are certainly part and parcel of the contract. There is no warrant for the contention that the printed form contract had superseded the earlier documents. Further, as pointed out by Seshagiri Aiyar, J. as a member of the Division Bench which decided that case in The South Indian Industrials Ltd. v. Mindi Rama Jogi (1928) 27 M.L.J. 501 : 26 I.C. 822. the position that, though the principal was disclosed, the personal liability of the agent should be upheld on the ground that he did not sign as agent, is an extreme position. That principle is adumbrated in Parker v. Winlow (1857) 7 Bl. 942 : 27 L.J.Q.B. 105 : 119 E.R. 1497. Seshagiri Aiyar, J., referring to the abovesaid case remarks that it is an extreme case.

9. In any event, the fact that the agent did not sign as the agent of his principal but only signed simpliciter would not conclude the matter. All that has been held in the above quoted division bench decision of this Court is that, there is a strong presumption in such an event that the contract was entered into by the agent in his individual capacity (Vide the observations at the end of page 512 in The South Indian Industrials Ltd. v. Mindi Rama Jogi1. I have already pointed out that, even though the defendant had not signed the formal contract as the agent of the Power Cables Ltd. it has been made amply clear in the tender itself that the defendant was making the tender only on behalf of the said company.

10. One part of the arguments of the learned Counsel for the plaintiff is that, once the contract has been signed by the agent in his individual capacity, no evidence aliunde is admissible to show that the agent had acted, in entering into the contract, for and on behalf of his principal. In The South Indian Industrials ltd. v. Mindi Rama Jogi (1928) 27 M.L.J. 501 : 26 I.C. 822. evidence had been let in that the defendants in that case knew fully well that Arbuthnot and Company, were the agents of the South Indian Industrials Ltd. (Plaintiffs in that case) and that Arbuthnot and Co. had acted only on behalf of the South Indian Industrials Ltd. in entering into contracts with the defendants. The contention before the Bench was that such parol evidence was inadmissible under Section 92 of the Evidence Act. Though the then officiating Chief Justice, who was one of the members of the Division Bench, was inclined to accept such a contention, Seshagiri Aiyar, J., has made the following observations :

My. Srinivasa Aiyangar objects to the admission of this parol evidence. He relies upon Section 92 of the Evidence Act and quotes an obiter dictum of Wilson, J. in Soopromoniam Chetti v. Heilgers (1928) 27 M.L.J. 501 : 26 I.C. 822. in support of his position. As pointed out in Venkata Subbiah Chetty v. Govindarajulu Naidu I.L.R. (1907) Mad. 45 : 18 M.L.J. 1. the question whether one of the contracting parties was acting for himself or on behalf of a principal does not relate to the terms of the contract. Bateman v. Phillips (1812) 15 East 272 S.C. : 104 E.R. 847. is a direct authority in favour of the admissibility of parol evidence under such circumstances. See also Bowstead on Agency, Article 90 and the cases quoted under it.

11. The learned Counsel for the plaintiff also referred to the decision in Venkatasubbiah Chetty v. Govindarajulu Naidu I.L.R. (1907) Mad. 45 : 18 M.L.J. 1. that is also a Bench decision. But, as a matter of fact, that decision is against the contention of the learned Counsel for the plaintiff. There it was observed (at page 47) that a question as to who the Contracting parties are is not one of the 'terms of a contract' within the meaning of Sections 91 and 92 of the Indian Evidence Act. It was held that oral evidence is admissible to show that the party made liable under the contract contracted for himself and as the agent of his partners. Even if it is to be held in this case that the formal printed form contract is the only document evidencing the contract and that the defendant was trying to lead evidence aliunde to show that he did not contract on his own behalf, but only on behalf of the Power Cables Private Ltd., such evidence cannot be shut out as infringing the Section 92 of the Evidence Act, in view of the decision of the Division Bench referred to above. The learned Counsel then referred to the decision in Shankar Bandu v. Shankar Babaji : AIR1956Bom165 . There, of course, it has been observed that a contract deals with the subject-matter as well as the persons between whom it is entered into, and the names of the parties in so far as they relate to the terms which create obligations, cannot be regarded as so divorced from the terms of the contracts and that evidence may not be led to show that some other persons intended to incur obligations under the contract instead of the parties designated therein. Venkatasubbiah Chetty v. Govindarajulu Naidu I.L.R. (1907) Mad. 45 : 18 M.L.J. 1. has been referred to in this decision. But the learned Judge of the Bombay High Court had quoted only the head note thereof. As already seen in the Madras case the Division Bench has already held that a question as to who the contracting parties are is not one of the 'terms of the contract' within the meaning of Sections 91 and 92 of the Evidence Act. I think it is unnecessary to pursue this aspect further because this is not a case where the defendant is trying to lead parol evidence or any other evidence aliunde to show that it acted only as the agent of the Power Cables Private Ltd. In fact, the defendant relies upon the terms of the contract themselves to prove its case. It is needless to stress that the tender as well as the acceptance of the tender, formed part of the contract and in those documents it has been made abundantly clear that the defendant was acting only on behalf of the Power Cables Private Ltd. Therefore, this is not a case where the defendant is trying to lead extraneous evidence in support of its case that it acted only as an agent of its principal. Under all these circumstances I am clearly of the view that the defendant, having acted only as the agent of its principal, namely, the Power Cables Private Ltd. and there being no contract to the contrary, the contract cannot be personally enforced against it. On this ground the plaintiff has to be non-suited. Therefore, I consider it not necessary to go into the other questions arising in this case.

12. Coming to the other suit, namely the one filed by the defendant for the recovery of the value of the goods already supplied, it was noted earlier that plaintiff (the defendant in that suit) had practically not raised any defence except saying that it was entitled to withhold the payment and set off the amount towards the damages it has suffered in respect of the breach of the contract committed by the defendant. Because of its stand that the contract was entered into by the defendant only in its individual capacity, there is no defence in the suit filed by the defendant that the same is not maintainable by the defendant as per the provisions of Section 230 of the Contract Act. Even so, on my finding recorded earlier, namely, that the defendant did not act on its own behalf in entering into the contract, but acted only on behalf of its principals namely, the Power Cables Private Ltd. the suit filed by the defendant has also necessarily to be dismissed, for, under Section 230 of the Act, the agent is not only not personally bound by the contract, but also cannot personally enforce the Contract.

13. In the result, both the suits are dismissed. In the circumstances of the case, I direct the parties to bear their respective costs.


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